Recurring Reports

2015

Other Budget Issues

Last Updated:

5/16/2015

Budget Issue:

May Revision proposal related to President's executive actions on immigration

Program:

Crosscutting

Finding or Recommendation:

Weigh trade-offs of including any funding for executive actions in budget given significant legal uncertainty. To extent funding is included, assume lower spending than budgeted in Governor's May Revision given likelihood of longer phase-in than assumed in budget.

Further Detail

President’s Executive Actions on Immigration

The President’s recent executive actions on immigration include actions that allow certain undocumented immigrants to request deferred action status, which provides temporary relief from deportation, and employment authorization. The President’s executive actions expand the Deferred Action for Childhood Arrivals (DACA) program and create the Deferred Action for Parents of Accountability (DAPA) program (also known as the Deferred Action for Parents of Americans and Lawful Permanent Residents program). For more details on these programs, please see our analysis of the President’s executive actions in our report, The 2015-16 Budget: Analysis of the Health Budget. Currently, the President’s executive actions cannot be implemented as a result of legal challenges (we discuss these legal challenges in more detail below). Under existing state law, some undocumented immigrants affected by the President’s executive actions—if such withstand legal challenge—may newly qualify for full-scope Medi-Cal, In-Home Supportive Services (IHSS), and the Cash Assistance Program for Immigrants (CAPI). The Administration also assumes an indirect effect on CalWORKs and CalFresh enrollment as discussed below.

The Governor’s Proposal

The Administration assumes the courts allow the federal government to begin implementing the President’s executive actions in the summer of 2015. Based on this, the Governor’s May Revision includes partial-year spending of $62 million General Fund in 2015-16 to support estimated increased enrollment in Medi-Cal, IHSS, CAPI, CalWORKs, and CalFresh as a result of the executive actions. The Administration assumes the additional enrollment into these programs begins October 1, 2015 and phases in over a twelve-month period in Medi-Cal and a six-month period in the other programs. The Governor also proposes $5 million General Fund for a new Immigration Assistance Program in the Department of Social Services (DSS) to help eligible individuals apply for DACA/DAPA status. The components of the Governor’s 2015-16 May Revision budget proposal are as follows.

Medi-Cal Budget Includes $28 Million General Fund for Full-Scope Coverage of Eligible Individuals. The May Revision includes about $28 million General Fund in Medi-Cal for spending associated with the provision of full-scope Medi-Cal coverage to eligible individuals receiving deferred action status under the President’s executive actions. The Administration assumes there will be roughly 100,000 such individuals enrolled in full-scope Medi-Cal by October 2016 (after the assumed twelve-month phase-in period).

IHSS Budget Includes $14 Million General Fund. Some of the individuals who are newly eligible for Medi-Cal may also be eligible for the IHSS program. The Governor’s May Revision assumes that about 2,000 individuals (2 percent of the estimated number of individuals who enroll in Medi-Cal) will enter the IHSS program at an estimated cost of about $14 million in 2015-16.

Budget Includes $1.4 Million General Fund for CAPI. The Governor’s May Revision assumes that 250 individuals will enroll in CAPI in 2015-16 as a result of the President’s executive actions. This results in a General Fund cost of $1.4 million in 2015-16.

Administration Assumes “Woodwork” Effect in CalWORKs and CalFresh—$19 Million General Fund Cost. Individuals granted deferred action under the President’s executive actions are not eligible for CalWORKs or CalFresh assistance under current federal and state law. However, the May Revision assumes some adults who are granted deferred action status will have children who are currently eligible for CalWORKs and CalFresh but are not enrolled. The proposal further assumes some of these adults will choose to enroll the eligible children as a result of the deferred action process. The Administration assumes this effect, sometimes referred to as a “woodwork” effect, will result in a cost of roughly $19 million General Fund in 2015-16. This woodwork effect could result because (1) legal services organizations may provide information to households that are not currently aware that they have members who are eligible for CalWORKs or CalFresh as they assist them through the proposed Immigration Assistance Program or (2) individuals who are granted deferred action status may become less hesitant to interact with the county human services agencies that administer CalWORKs and CalFresh.

Immigration Assistance Program—$5 Million General Fund Cost. The Governor’s May Revision proposes $5 million (General Fund) and one position for the DSS to contract with legal services organizations to provide application assistance to individuals who are eligible to take advantage of the executive actions. Of the $5 million total funding proposed, $191,000 would be kept at the state level to pay for administration of the program by DSS. It is unknown how many individuals could be served with the proposed funding, as the amount of funding contractors would receive per individual assisted is planned to be determined later through a stakeholder process. We note that the proposed Immigration Assistance Program is similar to the Unaccompanied Undocumented Minors (UUM) program, established through the 2014-15 budget package, which contracts with legal services organizations to assist unaccompanied, undocumented minors with applications for legal status. The additional position proposed in the May Revision would be responsible for managing both the UUM program and the proposed Immigration Assistance program. We also note the proposed Immigration Assistance program would not provide assistance with naturalization, which was the focus of the Naturalization Services Program—a similar grant program previously operated by the Department of Community Services and Development that has not been funded since 2007-08.

Significant Uncertainty Around Executive Actions

Significant Legal Uncertainty Creates Challenge in Estimating If and When President’s Executive Actions May Be Implemented. The President’s executive actions have not yet been implemented as a result of legal action challenging that the actions violated the United States Constitution as an overreach of executive power. There are several layers to the legal challenge and currently it is not clear if and when the President’s executive actions may be implemented. In response to the lawsuit filed by officials in 26 states who contend the President’s executive actions are an overreach of executive power, a federal district court judge issued an injunction preventing the actions from being implemented pending the result of the underlying litigation. The federal government subsequently appealed this injunction and on April 17, 2015, oral arguments were heard in the 5th Circuit Court of Appeals (hereafter referred to as the “5th Circuit”). The 5th Circuit has not yet issued a decision on the appeal. If the 5th Circuit lifts the injunction, then the federal government may proceed with implementing the President’s executive actions even though the underlying litigation still remains to be resolved. However, if the 5th Circuit does not lift the injunction, the President’s executive actions may be implemented no sooner than the time when the underlying litigation is resolved, which may not be before several years should appeals in the underlying litigation be made all the way to the United States Supreme Court.

Many Eligible for DACA and DAPA May Not Enroll. If the President’s executive actions are legally able to be implemented, the proportion of undocumented immigrants eligible for deferred action status under the actions who would take the step to apply for DACA or DAPA is uncertain, but history suggests many of those eligible would not apply. The United States Citizenship and Immigration Service reports approximately 60 percent of the current DACA-eligible population applied for DACA status in the first two years the program was in effect.

Eligible Individuals Would Also Have to Proactively Apply for State-Funded Programs. In addition to applying for deferred action status, individuals would need to take the additional step of applying for health and human services programs before receiving benefits from these programs. It is uncertain how many newly eligible individuals with DACA and DAPA status would apply for health and human services programs. However, there are reasons to suggest that enrollment could be low, such as government avoidance and language barriers.

LAO Analysis

Assuming Executive Actions Are Able to Be Implemented in 2015-16, Estimated General Fund Expenditures Likely Overstated. On the whole, we find the Administration’s estimated General Fund expenditures resulting from the potential implementation of the President’s executive actions are likely overstated for two main reasons.

Enrollment Phase-In Likely to Take Longer Than Assumed. While the Department of Health Care Services (DHCS) assumed a twelve-month phase-in period for Medi-Cal enrollment, DSS assumed a six-month phase-in period for enrollment into human services programs. In both cases, the assumed phase-in period is likely too short and is not consistent with past experience. For example, DHCS assumes 55 percent of those eligible for deferred action status under the President’s executive actions will apply for such status within twelve months. However, when the DACA program began in 2012, it took two years for 60 percent of those eligible to apply for deferred action status. Therefore, we believe it is reasonable to assume the phase-in period will be longer than six or twelve months, and as such, the proposed costs in the May Revision are likely overstated.

Woodwork Effect in CalWORKs and CalFresh Is Speculative. While the assumed woodwork effect impacting CalWORKs and CalFresh enrollment is possible, it is very difficult to predict. In our view, the administration’s proposal may overstate potential costs, particularly in CalWORKs.

Positions and Funding for Immigration Assistance Program Appear Reasonable. The Governor’s proposal to establish the Immigration Assistance Program in DSS builds on an existing program model that has been already been rolled out in the UUM program over the last several months. Given that there is uncertainty about the appropriate level of contract payments for application assistance in the Immigration Assistance program, we think the proposed level of funding is a reasonable starting place but that it would need to be revisited at a later date after more information becomes available. To the extent that that the executive actions are implemented during the budget year, we think the proposed Immigration Assistance Program would be a reasonable approach to providing DACA/DAPA-related application assistance that merits serious consideration.

Recommendations

Legislature Should Weigh Trade-Offs of Including Any Funding for Executive Actions in Budget. We recommend the Legislature weigh the trade-offs of including funding for costs associated with the President’s executive actions, including the Immigration Assistance Program, in the budget for 2015-16. Given the legal uncertainty around the President’s executive actions, we are not able to project if and when implementation of the actions is likely to begin. As such, we find that it is a risk-averse approach to budgeting to include funding associated with the President’s executive actions in the budget for 2015-16. The Legislature may want to include some funding in the budget given the risk that the President’s executive actions may be able to be implemented at some point during 2015-16. However, this comes at the cost of General Fund resources that may otherwise be used for legislative priorities in these and other program areas.

If Funding Is Included in Budget, Legislature Should Fund Immigration Assistance Program But Assume Lower Spending for State Public Assistance Benefits Than Assumed in Governor’s May Revision. If funding is budgeted for costs associated with the President’s executive actions, we recommend funding the proposed Immigration Assistance Program as budgeted, noting that the level of funding for this program will need to be revisited as additional information becomes available. However, for the reasons explained above, we find the Governor’s estimate of $62 million General Fund spending for state public assistance benefits in 2015-16 associated with the President’s executive actions is likely overstated. As such, to the extent this funding is included in the 2015-16 budget, we recommend reducing the Governor’s estimates. At a minimum, we recommend the Legislature reduce the DSS estimated costs (for IHSS, CAPI, CalWORKS, and CalFresh) to account for a twelve-month phase-in period rather than a six-month phase-in period. This will likely reduce the DSS costs by roughly 50 percent ($17 million in General Fund savings). In order to obtain a more precise estimate of savings, we recommend DSS provide the Legislature with an updated estimate of costs based on a twelve-month phase-in period. Further, we find the costs could be reduced by as much as 50 percent more than this across all programs (an additional $22 million in General Fund savings) as the phase-in is likely to take much longer than twelve months across all programs.